How a Third Stimulus Check Could Differ From Your First and Second Payments | Kiplinger - Costbucket

How a Third Stimulus Check Could Differ From Your First and Second Payments | Kiplinger




For first-round stimulus payments, families received an extra $500 for each dependent child age 16 or younger. That amount was increased to $600 for second-round payments. (The extra payments were in addition to the base amount of $1,200 or $600, respectively.) There’s a good chance the additional amount will be something other than $500 or $600 for a third stimulus check.

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Fewer People Could Qualify for a Third Stimulus Check

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Wealthier Americans didn’t get a first- or second-round stimulus check. That’s because payments were gradually decrease to zero if you’re single, married filing a separate tax return, or a qualifying widow(er) and had an adjusted gross income (AGI) on your 2019 tax return above $75,000. Married couples filing a joint return started to see their stimulus check shrink if their AGI exceeded $150,000. For people who claimed the head-of-household filing status, payments were reduced if your AGI topped $112,500.

However, that still means a lot of families with higher incomes – and who may not have suffered financially during the pandemic – still received something. That’s especially true for families with children. For example, a family of five with a 2019 AGI up to $228,000 still got a first-round stimulus check (although it would be a small one). For the second-round payments, a family of five got a check as long as their 2019 AGI didn’t exceed $210,000.

But when the CASH Act was up for debate in the Senate, the Republicans’ main objection was that stimulus checks would be sent to wealthy people who didn’t need the money if the bill passed. More recently, Sen. Joe Manchin (D-W.Va.) suggested that he won’t support a third round of stimulus checks unless payments are “targeted” and only sent to Americans who actually need them. To satisfy these concerns, the phase-out rules could be adjusted for third-round payments so that fewer people with higher incomes receive a check.

There are two easy ways to do this. First, the phase-out threshold amounts could be lowered. For instance, instead of having payments for married couples drop if their AGI is over $150,000, having the reduction begin with an AGI exceeding $100,000. The second way is to adjust the phase-out rate. First- and second-round stimulus payments were reduced at a rate of $1 for every $20 over the applicable AGI threshold. If the rate were changed to, say, $1 for every $10 over the threshold, then payments for people with higher incomes could be reduced to zero faster.

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First-round stimulus checks were based on either your 2018 or 2019 tax return, whichever was most recently filed when the IRS began processing your return. If you didn’t file a return for either of those two years, you could send the IRS the necessary information through an online portal. If you received benefits from the Social Security Administration, Railroad Retirement Board, or Department of Veterans Affairs, the IRS got the information it needed from those other government agencies. If the IRS didn’t get your information at all, you have to claim the amount due as a “recovery rebate” credit on your 2020 federal tax return (Form 1040).

Second stimulus checks are based on your 2019 return. If you didn’t file a return, you didn’t use the non-filers portal to get your first-round payment, and you don’t receive government benefits, then you’ll have to claim the “recovery rebate” credit on your 2020 return to get your money. The IRS is not using the non-filer portal for second stimulus payments.

The IRS is expected to begin accepting 2020 tax returns in late January or early February. Since third-round stimulus checks probably won’t be delivered before then, your third-round payments will most likely be based on your 2020 tax return, if it has already been file, or on your 2019 return if you haven’t filed your 2020 return when the IRS is ready to send your payment.

This content was originally published here.